Kason Industries - a typical U.S. industrial manufacturer and supplier of value-added parts to food service equipment OEMs such as Enodis (maker of Garland, Scotsman, Frymaster and other leading brands) - is a perfect example of the future role American manufacturing companies will play in hardscrabble global industries. The portion of the company's product components manufactured and imported from emerging market countries such as China has grown from 10% to over 50% in the past two years, and their plant-based employees are facing continued loss of jobs as Kason's traditional manufacturing activity is outsourced to workers overseas.
How will a company like Kason survive in this type of cut-throat global marketplace? Sure, they'll lobby for changes in U.S. trade and import laws. But more importantly, they will shift the playing field in their industry to their advantage. Kason is already in the forefront of tough U.S. industrial companies shifting their strategic focus in three important ways: (1) actively seek out opportunities for deeper integration into downstream customers' businesses, (2) pursue greater involvement in taking on value-added bundling and assembly activities, and (3) accelerate moves to offer increasingly more sophisticated engineering and solutions development offerings.
Where value goes so will margin! While cheap chinese imports will inevitably continue to gain share of low-margin components, their available portion of the overall profit pool will shrink as Kason's largest downstream customers - such as Enodis - look to top tier suppliers for greater involvement in driving the successs of their differentiated branded product strategies.
It won't be easy, and some jobs will be lost in the transition. But it's the only viable long-term path to sustainable differentiation and profitabilty. And increased U.S. employment!
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